Debts push loyalty rewards program to brink

Chris Vedelago and Cameron Houston

One of Australia's largest loyalty programs is on the brink of collapse potentially leaving more than 700,000 customers and some of the nation's biggest companies, including Myer, iSelect, Hoyts and GE Money, in limbo.

The Lifestyle Rewards program is facing insolvency proceedings over its failure to pay the Australian Taxation Office a $536,000 debt, with the company's director Edward ''Eddie'' Malkoun also under serious financial pressure from mounting debts.

Mr Malkoun is being personally pursued by the ATO after running up $1.87 million in income tax bills going back to 2007, while another creditor has accused him of passing a bad cheque of $109,500, according to court documents.

Several caveats have also been lodged by creditors over Mr Malkoun's mansion in Mount Martha, which was purchased for $4.36 million in 2011.

Lifestyle Rewards promotes itself as the ''pioneer and leading provider'' of loyalty cards. Card holders who shop with certain retailers earn points that can be cashed in for goods and services from companies including Myer, Hoyts, Coles, Woolworths, JB Hi-Fi, Aquila, GE Money, iSelect and Medibank Private.

Mr Malkoun has taken credit for helping create the Myer One and Hoyts Gold Club programs.

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''We've been in business for 14 years and we've seen a lot of rewards programs come and go,'' he told a trade publication in June 2012.

But court documents show the company, Club Lifestyle Pty, had stopped paying state payroll taxes months before, running up a $36,474 debt by early 2013.

A petition to wind up the company by the State Revenue Office was soon joined by the Australian Taxation Office over a $536,141 bill for unpaid taxes and superannuation charges. Another $218,497 is being personally sought against Mr Malkoun as a penalty for failing to meet his financial obligations as a company director.

The insolvency proceeding, which is due to be heard in the Supreme Court of Victoria in early October, could potentially affect more than 700,000 members who are eligible to claim points on more than 10,000 different rewards products.

The Sunday Age is also aware of one creditor who has physically threatened Mr Malkoun over other substantial personal debts unrelated to the looming collapse of Club Lifestyle.

Mr Malkoun has a permanent suite at Crown Towers and is believed to hold a financial stake in several prominent bars in Melbourne and Bali.

Mr Malkoun is the cousin of convicted heroin trafficker and former Victorian president of the Comanchero motorcycle gang, Amad ''Jay'' Malkoun.

The imminent collapse has already resulted in the withdrawal of several large companies from the program, according to a source close to Lifestyle Rewards.

Other companies are also now questioning the appropriateness of the group's advertisements.

Representatives from Coles and Woolworths said the retailers have no relationship with Lifestyle Rewards and do not know why their logo is being used in promotional materials.

A collapse could leave the program's customers with little recourse despite years of loyal shopping, echoing the experiences of the 2.7 million frequent flyer members caught out after Ansett's failure in 2001.

''The members got nothing. Once the employees got their entitlements and the administrators were paid, there was nothing left,'' said Jon Caneva, former spokesman for the now-defunct Ansett Global Rewards Action Group.